Federal Reserve chair Jerome Powell signals the ‘time has come’ for rate cuts, sparks broad rally in US stocks

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Federal Reserve News

Jerome Powell

WASHINGTON, Aug 24 — Federal Reserve chair Jerome Powell said yesterday that the “time has come” for the United States to start lowering interest rates, raising expectations...

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“The time has come for policy to adjust,” he said in a keynote speech at the Jackson Hole Economic Symposium in the western US state of Wyoming, in unusually direct remarks about the likely path of monetary policy. “Fed chair Powell sealed the deal for a September rate cut,” Bank of America economists wrote in a note to clients, adding: “we don’t think he sees elevated recession risks yet.”The Fed’s benchmark lending rate currently sits at a 23-year high of between 5.25 and 5.50 per cent, which has acted to cool demand in the world’s largest economy ahead of November’s presidential elections, in which inflation and the cost of living have taken a central role.

The Fed has a dual mandate from Congress to tackle both inflation and unemployment, and has been signalling in recent months that the risks to the two sides of its mandate are now coming into better balance. Many analysts expect the Fed to move ahead with a more cautious quarter-percentage-point rate cut in September, but see a larger half-point cut as a possibility — depending on upcoming data.

 

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